Businesses remain resilient in the wake of the pandemic, although the acute labor shortage, high costs, and supply chain disruptions represent major challenges for Connecticut employers.

That was the takeaway from a group of business leaders discussing the CBIA/Marcum 2022 Survey of Connecticut Businesses at the Sept. 23 The Connecticut Economy conference in Hartford.

The discussion was moderated by Michael Brooder, managing partner of Marcum LLP’s Hartford office, and featured BL Companies vice president Derek Kohl, Lux Bond & Green president and CEO John Green, and Deb Gearty, principal at Ritz, Inc. [pictured above, from left to right].

“This survey was filled with inflation, rising costs, labor shortages, and, yes, still COVID-related remote workforce issues,” Brooder said.

‘Looking for Opportunities’

Gearty said that while her company “was affected by global supply chain issues and people being slow to return to work,” they would be overall profitable for the year and were “going into 2023 very strong.”

Green said “the whole pandemic era was actually very strong” for his jewelry business.

While everyone was stuck inside during the pandemic, “people said they wanted to spend some money,” and they spent it on each other, he said.

“2022 has started out pretty strong as well,” Green continued, “despite lots of headwinds that we see.”

Kohl said his outlook for the rest of 2022 and 2023 is “positive, but with some caution.”

“There’s work out there,” Kohl said, “and our challenge, like many others, is we don’t have enough employees to seize those opportunities.

“We’re going to tread very carefully in the coming year, but look for those opportunities and continue to recruit and attract this great talent we see.”

Economic Outlook

The survey shows that 68% of businesses posted profits in 2021, while 17% broke even and 15% experienced losses—seven percentage points higher than projected in last year’s survey.

However, only 26% of businesses see Connecticut’s economy growing next year—down from 39% last year—with 36% forecasting static conditions and 38% projecting contraction, reflecting broad concerns about the labor shortage, inflation, and supply chain disruptions.

Gearty told an audience or more than 300 business leaders she could see the impact of global supply chain bottlenecks on the ground at construction sites.

“What we try to do is really look forward, be proactive, know what is out there, and engage with people early so that we understand their needs,” she said.

She added that although local manufacturers did what they could to keep businesses supplied, supply chain disruptions were a “global issue.”

When asked how their companies were impacted by skyrocketing inflation, three-quarters (75%) of businesses surveyed by CBIA and Marcum said they increased prices to remain in business.

Just under two-thirds (64%) saw margins eroded, while 23% invested less in equipment and other capital assets, and 6% laid off employees.

Navigating Bottlenecks

Green emphasized how important it was to plan ahead and communicate to prepare for supply chain disruptions.

“Whatever took eight weeks now takes 16 weeks,” he said.

“So I think it’s all been about planning, and if you don’t you’re going to find yourself in a pretty bad place.”

Kohl also has seen construction clients impacted by the lack of product availability.

“We’ve had to really adapt, get creative, and source other materials that were alternatives,” he said.

“But there have been impacts due to delays and increased costs, and it shortchanges the dominoes that would otherwise be put for growth and other expansions.”

Business Climate

This year’s survey showed that 50% of respondents believed the state’s business climate was declining, reflecting the summer release of CNBC’s America’s Top States for Business study, which dropped Connecticut 15 spots to number 39.

The survey shows that 68% of businesses posted profits in 2021, while 17% broke even and 15% experienced losses—seven percentage points higher than projected in last year’s survey.

When asked what could be done to improve Connecticut’s business climate, Kohl noted that his company has clients and projects in both the public and private sectors.

He said the inconsistency in municipal and state review processes created an “unknown climate for businesses,” which has driven away clients.

Kohl also called for an increased focus on transportation and infrastructure.

“Decades of underfunding has taken its toll,” he said.

Kohl praised the $5.4 billion in federal funding coming to the state as a way “to make our communities great to live and play in,” and a “revitalization of towns and downtowns.”

Green called infrastructure funding “critical,” saying some Lux Bond & Green employees lived 10 miles from their workplace, yet their one-way commute was an hour.

“Investing in the future has got to be part of what we look to our state to do,” he said.

Affordability

Gearty said some communities in the state were easier to live in than others, and encouraged a stronger sense of community.

“The attitude, the way that you go about problem solving and helping those entities come together and make things happen, matters,” he said.

The CNBC study ranked Connecticut the eighth costliest state to live, with one-third of employers also telling the CBIA/Marcum survey that affordability was the top concern for employees and their families.

Twenty percent said high taxes were the main concern for employees, followed by healthcare (18%), the economy (17%), education (6%), and transportation (5%).

Almost nine in 10 surveyed business leaders (89%) said the cost of doing business in Connecticut is increasing. CNBC ranked Connecticut the sixth costliest state for business.

The Changing Workplace

Brooder noted that with the rise of remote work, companies that are not able to offer work virtually will have a more difficult time finding and retaining employees.

Green—who, as a retailer, does not offer remote work—said he has put additional effort into creating a stronger employee culture.

“It’s not just about the money, it’s also about the enjoyment of the waking hours when people are at work,” he said.

“It’s been very important for us to create a culture and then give them the experience of when they’re at work, it’s an enjoyable exercise.

“We have to actually treat our people and listen to them much differently than we have in the past.”

Remote Work

Gearty could see an argument for and against remote work.

On the one hand, she said there was a big difference in team dynamics when communicating through video platforms rather than in person.

On the other hand, she said “the pandemic put a light on the fact that some of these jobs can be done remotely and can be done hybrid.”

“I see it as an opportunity. At the same time, it’s a challenge, and it will be ever-changing.”

Kohl said BL Companies worked hard to create a company culture that is present both in-person and remotely.

“We don’t want transactional relationships,” he said.

“We want solid, established relationships not only with our internal employees, but also with our clients.

“We’re trying to be more proactive in maintaining and enhancing those relationships to go on.”

Workforce Shortage

The conversation shifted to the most important issue facing Connecticut businesses: attracting and retaining employees.

Eight-five percent of employers told this year’s survey that attracting and retaining employees was difficult, with 39% calling the lack of skilled applicants the greatest obstacle to growth.

Kohl said that there was a “limited resource pool,” and with the small size of the state, “there’s a lot of competition here.”

Instead of just looking for current employees, Kohl is “investing in the future” by hiring interns who are in high school.

“We won’t see that return in investment until they graduate from college down the road,” he said.

“More funding, investment, and support can definitely aid us.”

Kohl also said businesses need to prioritize what the new generation of workers want.

Instead of focusing on healthcare and retirement, younger employees worry about renting, finding a car, and finding housing, he said.

“Trying to find that right mix of a compensation and benefits package that speaks to all has been really important for us,” he said.

Why Connecticut?

Brooder asked Gearty, Green, and Kohl why they chose to do business in Connecticut.

Green called Connecticut “a great place to work, play, and raise my family.”

He also said that as difficult as the workforce shortage is, he has some employees that are young and have been with his company for over a decade.

“When you find good people, you have to really figure out how to keep them, and when you can, it’s finding the next generation to work for us, which has been the biggest challenge for us.”

Gearty said the lifestyle in Connecticut was what keeps her in the state.

“We really do have a good place to live here and work,” she said.

“The workforce that we have here is really unbelievable,” Kohl added.

“Highly educated, extremely hard working, creative, I’d say some of the best in the nation.

“I think we should really be proud of what a great labor force we have, we just need to expand that.”

Policy Solutions

Gearty also touted CBIA’s TransformCT policy recommendations, which the survey results helped inform, as a great package of solutions for make Connecticut more attractive for residents and employers.

CBIA president and CEO Chris DiPentima told conference attendees earlier that solving the labor shortage crisis required long-term, sustainable solutions “that made Connecticut more affordable for residents and employers and unlocked opportunities for all.”

Almost one quarter of businesses surveyed by CBIA and Marcum said tax relief should be the top priority for the state’s next governor and General Assembly.

Seventeen percent cited more business friendly policies, followed by the economy (13%), government reform/regulatory relief (13%), state spending reductions (9%), and addressing the high costs of living and doing business (8%).